Sole trader record keeping: what records do you actually need to keep?

“Keep good records” is one of those pieces of business advice that sounds obvious until you ask the next question: What records, exactly?

If you are a consultant sending four invoices a month, a personal trainer buying equipment, or a creator earning through a mix of brand work and freelance jobs, your business may not feel complicated enough to need a finance department. You still need a record of what happened.

For an Australian sole trader, good record keeping is less about producing impressive spreadsheets and more about being able to explain your business transactions clearly: what you earned, what you spent, who still owes you money and what evidence supports the records.

First: what does the government actually require?

Australian Government guidance says businesses must keep records of transactions that relate to tax, super and registrations. This includes records of income and sales transactions, business expenses including cash purchases, end-of-year information such as creditors and debtors, bank records, and GST records if the business is registered for GST.

Most business records need to be kept for five years, starting from when you obtained the record or completed the transaction or action it relates to, whichever is later. Some types of records need to be kept longer.

As a sole trader, your business income and expenses are reported through your individual tax return rather than through a separate company tax return. That makes it especially useful to keep the business side of your money organised during the year, rather than trying to separate it from everything else later.

1. Keep records of your business income

Start with money coming in. For each source of business income, you want enough information to understand where it came from and why. That might include:

• invoices
• sales records
• payment summaries or income statements where relevant
• bank records showing payments received
• contracts or engagement agreements
• records of cash income
• platform statements for relevant online work

For example, a designer might receive $3,000 from an agency, $650 from a local café and $1,200 from a direct client in the same month. A useful income record would make those three payments obvious without forcing the designer to search their inbox for project names later. The key habit is to record the business context, not just the dollar amount.

2. Keep your invoices, including the ones that have not been paid

An invoice is more than a request for money. It is part of the history of the work you have billed. Your invoice records should make it easy to tell:

• who was invoiced
• what the invoice was for
• invoice number
• issue date and due date
• amount
• whether it was sent
• whether it has been paid, and the paid date where relevant
• whether it is overdue or cancelled

This is useful for cash flow as well as record keeping. If you have $8,000 of work sitting in “sent but unpaid”, you want to know that before you look at your bank balance and decide you are having a great month. business.gov.au recommends clear invoices and a process for managing unpaid invoices, and notes that invoices should be kept as part of your business records.

3. Keep records of business expenses

For expenses, make sure you are future-proofing any context. A bank statement showing “OFFICEWORKS $184.50” proves money moved, but it does not necessarily explain what you bought or how it related to the business.

A better expense record contains:

• merchant or supplier
• date
• amount
• what you bought
• expense category
• business-use percentage where relevant
• receipt, invoice or supporting document

For a videographer, “JB Hi-Fi $249” might be a work hard drive. For someone else it might be a home speaker. That distinction matters.

Government guidance on deductions says records need to substantiate what is claimed and explain the transactions. Recording an item as an expense in an app does not itself decide whether it is deductible; it creates the organised record that can later be reviewed correctly.

4. Keep receipts and supporting documents

Receipts matter because they provide evidence about the purchase. They can be physical or digital, and digital record-keeping options can include software, cloud systems and spreadsheets.

The useful question is not “Do I technically have this receipt somewhere?” It is: Could I find it quickly if I needed it?

A screenshot buried between 4,000 photos is technically stored, but it is not particularly useful record keeping. Attach a digital copy to the related expense, or use a filing structure where the connection is obvious.

5. Keep evidence behind business-use percentages

A lot of sole trader expenses are mixed-use. Common examples include:

• phone plans
• internet
• laptops
• cameras and devices
• vehicles
• home office costs
• software or subscriptions with personal use

If an expense has both business and private use, you should not simply assume the whole amount belongs in the business column. Keep a reasonable record of how you arrived at the business-use portion.

Depending on the type of expense, there may be specific ATO methods or record requirements. For example, if your phone is used roughly 60% for business, keep the evidence or calculation behind that figure rather than typing “60%” once and forgetting where it came from. That gives an accountant something meaningful to review.

6. Keep bank records — even if you do not use a dedicated business account

A separate business bank account can make administration easier, but the record-keeping obligation is about being able to explain your transactions, not simply having a particular banking setup.

If business and personal spending share an account, your organisation system needs to work harder. You will need to consistently identify which transactions relate to the business and which do not. That is one reason many sole traders choose to separate their business money operationally even when their structure does not require them to operate like a company.

7. Keep GST records if you are registered

GST changes the record-keeping picture. For most businesses, GST registration becomes compulsory when GST turnover reaches a certain threshold; special rules apply to some activities such as taxi and ride-sourcing services.

If you are registered for GST, keep the records required to support your GST reporting and tax invoices. If you are not registered, do not add GST to invoices as though you are. Because GST obligations can depend on your turnover and circumstances, always check current ATO guidance or speak with a registered tax or BAS agent when you are approaching the threshold.

8. Keep year-end records that explain what is still open

Tax time is easier when your year-end records show not only what happened, but what is unresolved. That includes things like:

• customers who still owe you money
• bills you still owe
• invoices that were cancelled
• expenses missing receipts
• mixed-use expenses requiring review
• recurring costs that need confirmation

For a freelancer, that can be as simple as knowing: “These three clients had not paid by 30 June.”

9. How long should you keep the records?

The practical headline is five years for most business records. But “five years” should not be treated as a universal delete date. Some records have longer retention requirements, and the start of the retention period can depend on when the record was obtained or the relevant transaction was completed.

If a document relates to an asset, a dispute, a tax loss or another matter that continues beyond one financial year, check the specific rule before deleting it. When in doubt, ask your accountant or check current ATO guidance.

10. Build a system you will actually use

The most technically perfect record-keeping system is useless if you ignore it for ten months. A practical sole trader system should be fast enough to use between real jobs.

• If you are a personal trainer, you should be able to record that equipment purchase before your next client.
• If you are a photographer, you should be able to attach the parking receipt while you are still sitting in the car.
• If you are a consultant, you should be able to mark an invoice paid when the bank notification comes through.

The closer the record is created to the real-world transaction, the less detective work you have later.

A simple weekly record-keeping routine

Try this once a week:

1. Add income that has been received.
2. Check invoices and mark anything paid.
3. Follow up overdue invoices.
4. Add expenses from the week.
5. Attach receipts.
6. Review mixed-use expenses.
7. Confirm recurring costs.
8. Check whether anything is missing.

That can be a ten-minute job when done regularly. Left until EOFY, it can become a weekend.

Where Indi fits

Indi is designed around the record-keeping job before the accounting job. It gives sole traders one place to organise ABN income, expenses, receipts and invoices, see what is still outstanding and build an EOFY Tax Pack throughout the year.

The goal is not to tell you what you can claim. The goal is to make sure the information you and your adviser need is not hiding across twelve different places.

Your financial companion. Your sole trader money, sorted.